Lifecome Biochemistry Co.,Ltd.'s (SZSE:002868) last week's 10% decline must have disappointed private companies who have a significant stake

Key Insights

• The considerable ownership by private companies in Lifecome BiochemistryLtd indicates that they collectively have a greater say in management and business strategy
• 50% of the business is held by the top 3 shareholders
• 33% of Lifecome BiochemistryLtd is held by insiders

A look at the shareholders of Lifecome Biochemistry Co.,Ltd. (SZSE:002868) can tell us which group is most powerful. The group holding the most number of shares in the company, around 42% to be precise, is private companies. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

While insiders, who own 33% shares weren’t spared from last week’s CN¥263m market cap drop, private companies as a group suffered the maximum losses

Let's delve deeper into each type of owner of Lifecome BiochemistryLtd, beginning with the chart below.

View our latest analysis for Lifecome BiochemistryLtd

What Does The Lack Of Institutional Ownership Tell Us About Lifecome BiochemistryLtd?

Institutional investors often avoid companies that are too small, too illiquid or too risky for their tastes. But it's unusual to see larger companies without any institutional investors.

There are multiple explanations for why institutions don't own a stock. The most common is that the company is too small relative to funds under management, so the institution does not bother to look closely at the company. It is also possible that fund managers don't own the stock because they aren't convinced it will perform well. Institutional investors may not find the historic growth of the business impressive, or there might be other factors at play. You can see the past revenue performance of Lifecome BiochemistryLtd, for yourself, below.

Hedge funds don't have many shares in Lifecome BiochemistryLtd. The company's largest shareholder is Tan Ping Lai, with ownership of 30%. The second and third largest shareholders are Shangrao Changxin No. 2 Enterprise Management Center (Limited Partnership) and Hangzhou Ciyin Investment Partnership (Limited Partnership), with an equal amount of shares to their name at 10.0%. Furthermore, CEO Tanping Lai is the owner of 1.0% of the company's shares.

To make our study more interesting, we found that the top 3 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Lifecome BiochemistryLtd

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

It seems insiders own a significant proportion of Lifecome Biochemistry Co.,Ltd.. Insiders have a CN¥755m stake in this CN¥2.3b business. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 23% stake in the company, and hence can't easily be ignored. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Company Ownership

It seems that Private Companies own 42%, of the Lifecome BiochemistryLtd stock. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 3 warning signs for Lifecome BiochemistryLtd (2 are concerning) that you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.